Navy $37 Billion Ships Seen Unsuitable Have 2-Year Window

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Workers construct a U.S. Navy Littoral Combat Ship (LCS) at Marinette Marine Corp., in Marinette, Wisconsin. Close

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Workers construct a U.S. Navy Littoral Combat Ship (LCS) at Marinette Marine Corp., in Marinette, Wisconsin.

The U.S. Navy has two years to convince critics, from lawmakers to some in its own ranks, that its troubled $37 billion Littoral Combat Ship program is worth continuing beyond the 24 vessels already under contract.

The Navy must make its case by 2015 for 28 more of the ships if it’s to continue the shipbuilding effort beyond the vessels it has already committed to buy from teams led by Lockheed Martin Corp. (LMT) and Austal Ltd. (ASB)

A confidential Navy study obtained this week by Bloomberg News found that the ships are too lightly armed, plans to swap equipment for different missions are impractical and the decision to build two versions complicates logistics and maintenance. Failure to resolve such issues will result in “ships that are ill-suited to execute” warfighting needs, Rear Admiral Samuel Perez wrote in the March 2012 report.

“The Perez report underscored nagging doubts” about the Littoral Combat Ship, according to Byron Callan, a defense analyst with Capital Alpha Partners LLC in Washington. He said in an e-mail that he would be surprised if all 52 planned ships are built and that it’s possible only those already under contract will be completed.

As the Pentagon faces $500 billion in across-the-board budget cuts over nine years, the Littoral Combat Ship is an example of a troubled project that has sailed on with the support of a military seeking the most advanced warfighting equipment possible, companies eager to build it and politicians hungry for the jobs created.

Photographer: Daniel Acker/Bloomberg

An employee welds a component of a U.S. Navy's Littoral Combat Ship (LCS) during production at Marinette Marine Corp., in Marinette, Wisconsin. Close

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An employee welds a component of a U.S. Navy's Littoral Combat Ship (LCS) during production at Marinette Marine Corp., in Marinette, Wisconsin.

Shipbuilding Plan

The Navy’s latest 30-year shipbuilding plan, submitted to Congress today, projects buying all 52 vessels by 2029, part of a construction budget that the service estimates will average $15.4 billion annually through 2023, up from $10.9 billion in the Pentagon’s pending fiscal 2014 request.

The service plans to request $70.4 billion for construction of 41 vessels through 2018, according to the plan. That includes $28.8 billion for 10 Virginia-class submarines, $15.7 billion for nine DDG-51 destroyers and $6.7 billion for the Littoral Combat Ships.

“The Navy is circling the wagons as I have never seen” to protect the Littoral Combat Ship, said Everett Pyatt, the Navy’s deputy for shipbuilding in the 1980s and now a critic of the ship. “They are unwilling to admit any errors.”

‘Best-Performing’

Officials led by Navy Secretary Ray Mabus said this week that changes in the ship already are under way to resolve the shortcomings cited by Perez. While the Littoral Combat Ship started out as a “mess,” it has “become one of our best-performing programs,” Mabus told the House defense appropriations subcommittee on May 7.

Photographer: Daniel Acker/Bloomberg

An employee descends scaffolding surrounding a U.S. Navy Littoral Combat Ship (LCS) under construction at Marinette Marine Corp., in Marinette, Wisconsin. Close

An employee descends scaffolding surrounding a U.S. Navy Littoral Combat Ship (LCS)... Read More

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Photographer: Daniel Acker/Bloomberg

An employee descends scaffolding surrounding a U.S. Navy Littoral Combat Ship (LCS) under construction at Marinette Marine Corp., in Marinette, Wisconsin.

Even critics of the ship, such as Senator John McCain, said canceling it now is unlikely because the Navy can’t wait to develop an alternative for a small, speedy and adaptable vessel.

“This is the problem with all of these programs -- once you get into production it’s incredibly difficult, and then what’s the alternative?” McCain said in an interview. At a Senate committee hearing on May 8, the Arizona Republican told Navy brass, “We need to fix it, or find something else quickly.”

No Fallback

The Navy “doesn’t have a fallback position if it killed the program now,” said Callan, citing the need to replace the Navy’s FFG-7 frigates that are being retired as well as mine-countermeasure ships that are aging.

The Navy agreed to buy four ships individually prior to signing a contract in 2010 to purchase 20 more, with 10 each from Lockheed and Austal.

The Littoral Combat Ship’s supporters in Congress would be likely to block any move to stop building the vessels already under contract, and breaking contracts would subject the Pentagon to substantial costs and litigation, according to Ben Freeman, a defense analyst and critic of the ship.

“We’re under contract to buy 20 ships and would have to pay fees if the contract weren’t fulfilled,” Freeman of the Washington-based Project on Government Oversight said in an e-mail. “Once the contract ends, however, cancellation becomes much more likely. There are simply too many problems with the ship, and too few missions that it can realistically fulfill.”

‘Real Test’

The military services are required by law to document for Congress their cases for multiyear contracts, including projected savings over buying one ship at a time.

That’s when “the real test for the program’s continuing to 52 vessels comes,” said Robert Levinson, a defense analyst for Bloomberg Government in Washington.

The ship’s flaws, “combined with budget constraints, could force the Navy to reduce the final number, significantly redesign the ship or even cancel the buy altogether,” he said.

A steel-hulled version of the ship is being made in Marinette, Wisconsin, by the Lockheed-led team, and an aluminum trimaran is being built in Mobile, Alabama, by the group led by Austal.

Construction costs have doubled to $440 million per ship from an original goal of $220 million. The Navy is requesting $2 billion to buy four ships in fiscal 2014 -- two from Bethesda, Maryland-based Lockheed and two from Henderson, Australia-based Austal.

Costs Double

The last four vessels in the group of 20 will be requested next year in the Pentagon’s fiscal 2015 budget. After that, the Navy must present its plan for the final 28 vessels, including whether it will curtail or cut the program or go with only one of the two designs. That’s when the program is most vulnerable to critics.

“We understand what is at stake and will get this right,” Vice Admiral Richard Hunt, head of the service’s LCS Council, intended to improve the program, said in a statement.

“I have great confidence in the LCS program,” he said. “It provides needed capability now combined with the ability to adapt to changing requirements in the future.”

The Littoral Combat Ship was conceived in 2001 as an innovative development program that would compress the time needed to field a new warship, according to Loren Thompson, a defense analyst and industry consultant with the Arlington, Virginia-based-Lexington Institute.

“Today, it is producing ships, but those ships do not have all the equipment or personnel they need to accomplish planned missions,” he said. The program’s success “hinges on bringing capabilities into alignment with expectations over the next two years,” he said in an e-mailed statement.

Pyatt, the former Navy official, agreed that the service has only a few years to make its case.

“I hope we can end purchases after the ships needed for drug control, piracy control and similar low-risk tasks are purchased,” he said in an e-mailed statement. “I think that is about 20 ships.”

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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